Australian stocks recovered after an initial dive driven by Wall Street

Jeff Gross/Getty Images

The Australian market was hit by a wave of panic from Wall Street.

In early trade, the ASX200 was down 103.10 points or 1.8%, adding to yesterday’s 1% fall.

However, by the close the index has clawed back some lost ground, ending down 0.78% to 5,668.40 points.

US stocks were hammered as optimism for a US-China trade deal faded and on renewed concerns about the prospect of slowing economic growth.

The S&P500 index fell 3.2%, the tech-heavy Nasdaq index was down 3.8%, and the Dow Jones lost almost 800 points or 3.1%.

The three US indices had all rallied more than 1% Monday as President Donald Trump touted his meeting with Chinese President Xi Jinping over the weekend in Argentina.

But optimism faded after key details on the framework of a deal appeared unsettled.

Treasury yields continued to slide, with the 10-year down 8 basis points to 2.91%. The yield spread between US 2-year and 10-year bonds fell to just 11 basis points — around half what it was a week ago.

John Higgins, an analyst at Capital Economics, says the inversion of is further evidence that investors are coming round to our downbeat view of the prospects for the US economy.

“Investors in the US panicked themselves into a rout overnight,” says Michael McCarthy of CMC Markets in Australia.

On the ASX, the banks and financials led the slump.

Westpac closed down 1.1% to $25.59 and Macquarie 2.5% to $113.41

Qantas fell 3% to $5.76 and CSL 1.1% to $179.75.

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